BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Kevin de León, Chair SB 211 (Price) - Tax Administration: Disclosure of Information: Franchise Tax Board and Cities Amended: May 8, 2013 Policy Vote: G&F 7-0 Urgency: No Mandate: Yes Hearing Date: May 20, 2013 Consultant: Robert Ingenito This bill does not meet the criteria for referral to the Suspense File. Bill Summary: SB 211 would extend the authorization until January 1, 2019, and extend the repeal date on the reciprocal sharing of tax information between the Franchise Tax Board (FTB) and a city's tax officials. Fiscal Impact: FTB indicates that this measure would result in revenue gains of $1.5 million in 2014-15 and $4.9 million in 2015-16. FTB's indicates that it currently has reciprocal agreements with 102 cities, and that its administrative costs to administer the program are about $718,000 annually. Background: Tax information sharing between the State and local agencies has existed for roughly 30 years, when FTB first sponsored legislation mandating cities to annually report information obtained from businesses they licensed. FTB used the information to identify new businesses that were obtaining local business licenses and paying business license taxes, but may not have been filing state income tax returns. While the program generated revenue, the Legislature repealed the program in 1999 because the cost of state reimbursed mandate claims from local agencies grew too much, making the program no longer worth its cost. In 2001, the Legislature reenacted the program, but it instead allowed city tax officials to obtain state income tax information subject to a written agreement between FTB and the taxing authority of a city (AB 63, Cedillo, 2001); FTB charged the cities for its costs for collecting and sending the information. The Legislature extended the program in 2006 until 2011 (SB 1374, Cedillo). In 2008, the Legislature extended the program until 2014, but allowed cities to offset costs paid by SB 211 (Price) Page 1 providing its business license tax information to FTB to assist Personal Income and Corporation Tax collection (SB 1146, Cedillo). Under the program, FTB may grant information limited to a taxpayers' name, address, social security or taxpayer identification number, and business activity code. Only city employees may use the tax information provided to the city, and may only use it for tax collection purposes. Proposed Law: This bill would remove the sunset on the state-local tax information sharing program, and would allow agents of the city to receive information. Staff Comments: Municipalities often use consultants to collect taxes on contingency, most notably Muni Services, LLC and HdL companies. However, current law prohibits cities from sharing information obtained from FTB with these agents due to privacy concerns; consultants work on contingency and have little incentive to safeguard information. SB 211 would expressly allow these agents to receive this information.